Benefits Roundtable August 20, 2013 Rey Guillen, Employee Benefits Director Sandra Poole, Labor...

County of Santa Clara Benefits Roundtable

August 20, 2013

Rey Guillen, Employee Benefits Director Sandra Poole, Labor Relations Director

2

Agenda Section 1 Review of Medical RFP Results

Section 2 Health Care Reform Updates

Section 3 Introduction to Account Based Health Plans

Section 4 Question & Answer

County of Santa Clara Current Medical Plan Enrollment

3

Carrier Kaiser Health Net Valley Health

Plan

Total Active Enrollment 7043 3589 5021

Employee + Spouse + 1 or more Deps 3038 1680 2709

843

421

1048

Employee Only

Employee + Spouse

Employee + Child(ren)

1861 1107

1096

1048 338

464

County of Santa Clara RFP Goals & Objectives

4

RFP Primary Purpose - Determine if the County’s current Health Net medical plans (for both actives and retirees):

Continue to meet the needs of the County, its employees and retirees Provide the “Best Value” to the County, it’s employees and retirees Ensure that the County’s benefits and rates are competitive

RFP Primary Objectives :

Create savings without benefit modification. The County has several collective bargaining agreements that mandate certain benefits

Improved Customer Service levels to employees and retirees Partner with a health plan provider who has a commitment to developing strong networks with breadth and quality of

providers; as well as strong network discounts and innovative products and programs to help reduce the cost of providing health care/trend now and into the future

Partner with a health plan provider that has a commitment to Wellness and keeping members Healthy The County desires to continue providing its employees and retirees with health care options that afford cost-effective

choice and flexibility, while maintaining comprehensive benefit levels Establishing a partnership with a vendor that can offer comprehensive services to the employees and retirees covered

under the plans is a key objective The importance of cost savings is matched only by the importance of a strong service model and capabilities to meet

the needs of The County and its employees

County of Santa Clara RFP Goals & Objectives – Benefit Alternatives

5

Based upon feedback ESA received from the County’s employee organizations at the March 22, 2013 Benefits Advisory Roundtable, the County requested Alliant Insurance Service to obtain quotes for the following three scenarios for an effective date of January 1, 2014:

Scenario 1 - Provide quotes to match ALL current Health Net plan benefit levels

Scenario 2 - Provide quotes to match ALL current Health Net plan benefit levels AND add an HMO plan that would be offered alongside the current POS plan to actives and early retirees

Scenario 3 - Provide quotes to replace the current Health Net POS plan with a dual option of an HMO and a PPO for actives and early retirees, as well as all other current retiree plan offerings

© 2013 Alliant Insurance Services, Inc. All rights reserved. Alliant Employee Benefits, a division of Alliant Insurance Services, Inc. CA License No. 0C36861

August 20, 2013

Alliant Team:Christine KernsKimberly MillerLinda Kepley

Santa Clara CountyBenefits Round Table


Section 1: Medical RFP Results Project Scope

RFP Project Scope:

Completion of Final RFP Document Bid Solicitation Comprehensive analysis of received proposals, plan design comparison, rate analysis and network comparisons

Considerations:

Rates & Rate caps Network Strength Partnership & Flexibility Product Offerings & Innovation

Current Health Net POS Network Usage:

Tier 1 77.58% of non-capitated claims costs & 90% of utilization Tier 2 16.64% of claims costs Tier 3 5.79% of claims costs

Network Analysis:

Current Top Provider Comparison Current Pharmacy Formulary Comparison All carriers provided Geo Access reporting to show employees with desired access between 90% and 100%


Section 1: Medical RFP Results Plan Design Comparison

Medical Plan Benefits Health Net POS Health Net HMO Health Net PPO

Current Option OptionHMO In-Network Out-of-Network HMO In-Network Out-of-Network

Calendar Year Deductible

Individual / Family None None $200 / $600 None None $200 / $600

Annual Out-of-Pocket Maximum

Individual / Family $1,500 / $4,500 $2,000 / $6,000 $3,000 / $9,000 $1,500 / $4,500 $2,000 / $6,000 $3,000 / $9,000

Physician Office Visit $15 $20 30% $15 $20 30%

Specialist Copay $15 $20 30% $15 $20 30%

Preventative Care

Child (through age 17) No Charge No Charge 30% No Charge No Charge 30%

Adult (age 18 and older) No Charge No Charge Not Covered No Charge No Charge Not Covered

Lab and X-Ray

CT, MRI, PET scans No Charge 10% 1 30% 1 No Charge 10% 1 30% 1

Other lab and x-ray tests No Charge 10% 1 30% 1 No Charge 10% 1 30% 1

Hospitalization

Inpatient No Charge 10% 1 30% 1 No Charge 10% 1 30% 1

Outpatient No Charge 10% 1 30% 1 No Charge 10% 1 30% 1

Emergency Room $50 $75 30% $50 $75 30%

(Waived if admitted)

Urgent Care Services $35 $50 30% $35 $50 30%


Durable Medical Equipment No Charge 50% 1 (Max $5,000) Not Covered No Charge 50% 1 (Max $5,000) Not Covered

Chiropractic Care 2 $15 Not Covered Not Covered $15 Not Covered Not Covered

Acupuncture Care $15 Not Covered Not Covered $15 Not Covered Not Covered

PRESCRIPTION DRUGS Generic / Brand / Non-Formulary Generic / Brand / Non-Formulary

Retail - 30 day supply $5 / $15 / $30

Mail Order - 90 day supply $10 / $30 / $601 Services require prior certification.

This summary is for informational purpose only. It does not amend, extend, or alter the current policy in any way. In the event information in this summary differs from the Plan Document, the Plan Document will prevail.

2 Note - If referred and authorized by the medical group, it is covered under the POS plan and that is built in to the medical plan. Additionally, the chiro rider gives the member the additional option of direct access to a Chiropractic (ASHN) network provider and can directly refer themselves for coverage. Benefit is $5 OV (max 20 visits per calendar year)



Generic / Brand / Non-Formulary

$5 / $15 / $30

$10 / $30 / $60 $10 / $30 / $60

$5 / $15 / $30


Section 1: Medical RFP Results Medical Marketing Carrier Response

Carrier AM Best RatingStandard &

PoorsProduct(s) Response

Aetna A A+ POS/PPO/HMO Declined to quote - Not competitive

Anthem A A+ POS/PPO/HMO Quoted

Blue Shield A A POS/PPO/HMO Quoted

CIGNA A A- POS/PPO/HMO Declined to quote - Not competitive, no POS Product

Health Net B++ BBB- POS/PPO/HMO Quoted

UHC Not Found AA- POS/PPO/HMO Declined to quote - Not competitive

MEDICAL MARKETING LIST


Section 1: Medical RFP Results RFP Summary Results - Scenario 1

Overview of Results for the above Scenarios for a January 1, 2014 effective date:

Scenario 1 Health Net is offering a 6 month savings of -3.37%, or $1.75 Million

Rate cap of 13% (ACA fees included)

Blue Shield is offering a 6 month savings of -4.98%, or $2.58 Million Rate cap of 8.9% (ACA fees not included)

Anthem’s quote is not competitive as it results in an additional cost of $3.2 million Rate cap of 11% (ACA fees included)


Section 1: Medical RFP Results RFP Summary Results - Scenario 2


Scenario 2 - Enrollment Assumption = 70% HMO/30% POS Health Net is offering an estimated savings of $2.7 million with enrollment assumptions

The Health Net HMO is 3.5% less than the Health Net POS plan Little incentive to add the HMO Rate cap of 13% (ACA Fees included)

Blue Shield is offering an estimated savings of $2.8 million with enrollment assumptions The Blue Shield HMO is 1% less than the Blue Shield POS plan Little incentive to add the HMO Rate cap of 8.9% (ACA fees not included)

Anthem is offering an estimated savings of $6.7 million with enrollment assumptions Anthem HMO is 39.9% less than the Anthem POS plan Rate cap of 11% (ACA fees included)


Section 1: Medical RFP Results RFP Summary Results – Scenario 3


Scenario 3 – Enrollment Assumption = 80% HMO/20% PPO

Health Net is offering an estimated savings of $2 million with enrollment assumptions The HMO is 4.5% less than the Health Net PPO Rate cap of 13% (includes ACA fees)

Blue Shield is offering an estimated savings of $1.6 million with enrollment assumptions The HMO is 7.2% less than the Blue Shield PPO Rate cap of 8.9% (does not include ACA fees)

Anthem is offering an estimated savings of $13.5 million with enrollment assumptions The HMO is 18.1% less than the Anthem PPO Rate cap of 11% (ACA fees included)


Section 1: Medical RFP Results RFP Questionnaire Summary

General Information Health Net Blue Shield Anthem Agreement to all Basic Assumptions Yes Yes Yes

Second Year Rate Cap (assumes enrollment does not change by more than 10%)

13%Includes ACA Fees

8.9%Does not inlcude ACA fees

11%Includes ACA Fees

Performance Guarantee 1% of Premium 2% of Premium 10% of Premium Mental Health & Substance Abuse Vendor MHN Magellan Anthem Santa Clara Valley Medical Center - In-Network? Yes Yes Yes

NCQA* Scoring Overall Score HMO - Commendable

PPO - Commendable HMO - Commendable

PPO - Accredited HMO - CommendablePPO - Commendable

Access & Service HMO - 4 StarsPPO - 3 Stars

HMO - 4 StarsPPO - 4 Stars


Quality Providers HMO - 3 StarsPPO - 4 Stars



Provisional, Pending & Denied are the other accreditation values.

Excellent - NCQA awards its highest accreditation status of Excellent to organizations with programs for service and clinical quality that meet or exceed rigorous requirements for consumer protection and quality improvement. HEDIS and CAHPS results are in the highest range of national performance

Commendable - NCQA awards a status of Commendable to organizations with well-established programs for service and clinical quality that meet rigorous requirements for consumer protection and quality improvement.

Accredited - NCQA awards an accreditation status of Accredited to organizations with programs for service and clinical quality that meet basic requirements for consumer protection and quality improvement. Organizations awarded this status must take further action to achieve a higher accreditation status.

* NCQA Health Plan accreditation is the Gold Standard for assuring and improving quality care and patient experience. NCQA is a rigorous, comprehensive and transparent accreditation program that includes unbiased, third party review to verify, score and publicly record and report results.


Section 1: RFP Results - Scenario 1Financial Summary - Status Quo

Line of Coverage Lives CurrentHealth NetOption 1

% DBlue Shield

Option 2% D

AnthemOption 3

% D

Health Net POS Blue Shield POS Anthem POS

Health Net POS - Actives 4,042 $42,355,399 $40,726,414 -3.85% $40,271,507 -4.92% $44,698,838 5.53%

Health Net PPO Blue Shield PPO Anthem PPO

Health Net PPO - Actives 1 $12,747 $12,257 -3.85% $11,796 -7.46% $12,769 0.17%

Actives Subtotal 4,043 $42,368,146 $40,738,671 -3.85% $40,283,304 -4.92% $44,711,607 5.53%


Health Net POS - Early Retirees 383 $2,687,505 $2,584,145 -3.85% $2,555,279 -4.92% $2,736,476 1.82%


Health Net PPO - Early Retirees 49 $461,149 $443,413 -3.85% $426,753 -7.46% $383,283 -16.89%

HN FlexNet Blue Shield PPO Anthem Assurance

Health Net FlexNet - Early Retirees 1 $10,914 $10,494 -3.85% $10,100 -7.46% $3,618 -66.85%

Early Retirees Subtotal 433 $3,159,568 $3,038,052 -3.85% $2,992,133 -5.30% $3,123,376 -1.15%


Health Net POS - Medicare Retirees 1,101 $4,226,370 $4,226,370 0.00% $4,067,682 -3.75% $5,505,687 30.27%

Health Net PPO Blue Shield GMAPD Anthem PPO

Health Net PPO - Medicare Retirees 2 $8,870 $8,870 0.00% $7,995 -9.87% $10,182 14.79%


Health Net FlexNet - Medicare Retirees 441 $2,028,509 $2,028,509 0.00% $1,866,748 -7.97% $1,660,170 -18.16%

HN Seniority Plus Blue Shield PPO Anthem

Health Net Seniority Plus - Medicare Retirees 32 $105,220 $105,220 0.00% $93,241 -11.38% $109,492 4.06%

Medicare Retirees Subtotal 1,576 $6,368,970 $6,368,970 0.00% $6,035,666 -5.23% $7,285,532 14.39%

TOTAL 6 MONTHS PREMIUM 6,052 $51,896,683 $50,145,692 $49,311,102 $55,120,515

6 MONTHS DOLLAR CHANGE ($1,750,991) ($2,585,581) $3,223,831

6 MONTHS PERCENTAGE CHANGE -3.37% -4.98% 6.21%


Section 1: RFP Results - Scenario 1Active Rates Summary - Status Quo

Benefit Plan & Coverage Level

KAISER HMO($10 CO-PAY): Total Bi-Weekly Rate Total Bi-Weekly Rate Total Bi-Weekly Rate Total Bi-Weekly Rate

Employee $310.05 $310.05 $310.05 $310.05 Employee and Spouse $651.10 $651.10 $651.10 $651.10

Employee and Child(ren $558.09 $558.09 $558.09 $558.09 Family $899.14 $899.14 $899.14 $899.14

VALLEY HEALTH PLAN HMO ($0 CO-PAY):



HEALTH NET POS ($15 CO-PAY):

Employee $456.45 $438.89 $433.99 $392.83 Family $966.42 $929.26 $918.88 $1,060.66

Note: Part-time coded employees pay a pro rata portion of the premiums

2013-2014 PLAN YEAR Biweekly Benefit Plan RatesFull-Time Active Employees

In-Force Rates Kaiser/VHP/HN Kaiser/VHP/Blue Shield

Scenario 1 - Status Quo

Kaiser/VHP/Anthem


Section 1: RFP Results - Scenario 1Early Retiree Rates Summary - Status Quo


Total Bi-Weekly Rate Total Bi-Weekly Rate Total Bi-Weekly Rate Total Bi-Weekly Rate

HEALTH NET POS:

Employee $449.81 $432.51 $427.68 $387.44 Employee + 1 $650.40 $625.38 $618.40 $813.63

Family $1,104.74 $1,062.25 $1,050.38 $1,162.33 HEALTH NET PPO:

Employee $598.55 $575.52 $553.90 $411.20 Employee +1 $886.26 $852.18 $820.16 $863.53

Family $1,225.05 $1,177.93 $1,133.68 $1,233.61 HEALTH NET FLEX NET:

Employee $839.56 $807.27 $776.94 $278.28 Employee + 1 $1,380.42 $1,327.33 $1,277.46 $584.39

Family $1,820.62 $1,750.59 $1,684.82 $834.84

2013-2014 PLAN YEAR Biweekly Benefit Plan Rates

Early Retirees

Scenario 1 - Status Quo

In-Force Rates Health Net - Renewal Blue Shield Anthem Blue Cross


Section 1: RFP Results - Scenario 2 Financial Summary – HMO & POS


% DBlue Shield

Option 2% D

AnthemOption 3

% D

Health Net POS & HMO Blue Shield POS & HMO Anthem POS & HMO

Health Net POS - Actives 4,042 $42,355,399 $39,728,615 -6.20% $39,989,612 -5.59% $34,245,723 -19.15%


Health Net PPO - Actives 1 $12,747 $12,257 -3.85% $11,796 -7.46% $12,769 0.17%

Actives Subtotal 4,043 $42,368,146 $39,740,872 -6.20% $40,001,408 -5.59% $34,258,492 -19.14%


Health Net POS - Early Retirees 383 $2,687,505 $2,584,145 -3.85% $2,555,279 -4.92% $2,907,940 8.20%





Early Retirees Subtotal 433 $3,159,568 $3,038,052 -3.85% $2,992,133 -5.30% $3,294,841 4.28%


Health Net POS - Medicare Retirees 1,101 $4,226,370 $4,226,370 0.00% $4,067,682 -3.75% $5,850,626 38.43%


Health Net PPO - Medicare Retirees 2 $8,870 $8,870 0.00% $7,995 -9.87% $10,182 14.79%





Medicare Retirees Subtotal 1,576 $6,368,970 $6,368,970 0.00% $6,035,666 -5.23% $7,630,470 19.81%


6 MONTHS DOLLAR CHANGE ($2,748,790) ($2,867,477) ($6,712,881)

6 MONTHS PERCENTAGE CHANGE -5.30% -5.53% -12.94%


For illustrative purposes, this Summary assumes that 70% of POS Actives move to HMO plan (Base Plan) and 30% stay on the POS, actual premium will vary based on plan selectionEarly Retirees are eligible for the HMO, but we did not make any assumptions on this summary for the early retirees


Section 1: RFP Results - Scenario 2 Active Rates Summary - HMO & POS









Employee $456.45 $438.89 $433.99 $417.45 Family $966.42 $929.26 $918.88 $1,127.11

HMO Plan

Employee $423.53 $429.65 $251.05 Family $896.73 $909.69 $677.83


No Current Plan


Scenario 2 - Add HMO Plan

In-Force Rates Kaiser/VHP/HN Kaiser/VHP/Blue Shield Kaiser/VHP/Anthem

HMO Plan


Section 1: RFP Results - Scenario 2 Early Retiree Rates Summary - HMO & POS



HEALTH NET POS:


Family $1,104.74 $1,062.25 $1,050.38 $1,235.16 HEALTH NET PPO:


Family $1,225.05 $1,177.93 $1,133.68 $1,233.61 HEALTH NET FLEX NET:

Employee $839.56 $807.27 $776.94 $278.28 Employee +1 $1,380.42 $1,327.33 $1,277.46 $584.39

Family $1,820.62 $1,750.59 $1,684.82 $834.84 HMO Plan:

Employee $417.37 $423.40 $246.82 Employee + 1 $603.49 $612.21 $518.32

Family $1,025.07 $1,039.88 $740.46 No Current Plan


Early Retirees

Scenario 2 - Add HMO Plan


HMO Plan


Section 1: RFP Results - Scenario 3 Financial Summary – HMO & PPO


% DBlue Shield

Option 2% D

AnthemOption 3

% D

Health Net PPO & HMO Blue Shield PPO & HMO Anthem PPO & HMO

Health Net POS - Actives 4,042 $42,355,399 $39,667,513 -6.35% $40,484,935 -4.42% $29,831,433 -29.57%


Health Net PPO - Actives 1 $12,747 $12,201 -4.28% $12,740 -0.06% $10,764 -15.55%

Actives Subtotal 4,043 $42,368,146 $39,679,714 -6.35% $40,497,675 -4.41% $29,842,197 -29.56%


Health Net POS - Early Retirees 383 $2,687,505 $2,609,985 -2.88% $3,040,336 13.13% $2,136,767 -20.49%





Early Retirees Subtotal 433 $3,159,568 $2,958,330 -6.37% $3,444,667 9.02% $2,422,377 -23.33%


Health Net POS - Medicare Retirees 1,101 $4,226,370 $5,056,128 19.63% $4,338,202 2.65% $4,303,833 1.83%


Health Net PPO - Medicare Retirees 2 $8,870 $8,870 0.00% $7,611 -14.20% $7,374 -16.87%





Medicare Retirees Subtotal 1,576 $6,368,970 $7,198,728 13.03% $6,305,802 -0.99% $6,080,869 -4.52%


6 MONTHS DOLLAR CHANGE ($2,059,911) ($1,648,540) ($13,551,241)

6 MONTHS PERCENTAGE CHANGE -3.97% -3.18% -26.11%


For illustrative purposes, this Summary assumes that 80% of POS Actives move to HMO plan (Base Plan) and 20% move to PPO, actual premium will vary based on plan selectionEarly Retirees are eligible for the HMO, but we did not make any assumptions on this summary for the early retirees


Section 1: RFP Results - Scenario 3 Active Rates Summary – HMO & PPO









Employee $456.45 $443.28 $462.85 $306.67 Family $966.42 $938.55 $979.98 $828.02

HMO Plan

Employee $423.53 $429.65 $251.05 Family $896.73 $909.69 $677.83


No Current Plan

Move to PPO Plan


Scenario 3 - Add HMO Plan and PPO Plan replaces POS Plan

In-Force Rates Kaiser/VHP/HN Kaiser/VHP/Blue Shield Kaiser/VHP/Anthem

HMO Plan


Section 1: RFP Results - Scenario 3 Early Retiree Rates Summary – HMO & PPO



HEALTH NET POS:


Family $1,104.74 $1,072.87 $1,150.24 $907.60 HEALTH NET PPO:


Family $1,225.05 $1,072.87 $1,150.24 $907.60 HEALTH NET FLEX NET:

Employee $839.56 $807.27 $776.94 $278.28 Employee +1 $1,380.42 $1,327.33 $1,277.46 $584.39

Family $1,820.62 $1,750.59 $1,684.82 $834.84 HMO Plan:

Employee $417.37 $423.40 $246.82 Employee + 1 $603.49 $612.21 $518.32

Family $1,025.07 $1,039.88 $740.46 No Current Plan

Move to PPO Plan


Early Retirees

Scenario 3 - Add HMO Plan and PPO Plan replaces POS Plan


HMO Plan


Section 1: RFP Results Provider Network Summary

Network Analysis shows that there will be some disruption if the County changes medical carriers Blue Shield

Financial Proposal creates an opportunity for savings in premium

Provider Network Significant disruption with the Mental Health Network

RX Formulary Significant disruption with the Pharmacy formulary

Anthem Financial

Proposal creates a greater degree of savings for the two alternative proposals Provider Network

Disruption is not as significant compared to Blue Shield Opportunity for additional in-network access due to larger provider network compared to

Health Net RX Formulary

Disruption with Anthem is not as significant as compared to Blue Shield


Section 1: RFP Results Provider Network Comparison -Summary Results

Category

HMO PPO MH/SA RX HMO PPO MH/SA RX HMO PPO MH/SA RX

Inpatient Facilities 93% 93% 90% 93% 24% 95% 98%

Outpatient Facilities 87% 66% 79% 84% 18% 88% 92%

MHN Professional Providers 91% 37% 60%

MHN Outpatient Facilities 96% 56% 76%

Top RX by $ Paid 81% 66% 75%

Top RX by Script Volume 96% 88% 92%

Health Net AnthemCarrier % In-Network

County of Santa Clara Provider Utilization Comparison

Blue Shield


Section 1: Medical RFP Results Potential Next Steps

Based on the results of the RFP marketing, the County should take advantage of the immediate $1.75 million savings with Health Net effective January 1, 2014

This change requires no change in plan structure for the period of January 1 through June 30, 2013

In order to realize the greater savings associated with the Anthem proposals, the County should discuss the plan structure changes with the bargaining units

It will be important to engage the bargaining units in the details related to:

Carrier change Employee out-of-pocket costs Network changes Dual option offering for both options outlined above

It is recommended that discussions begin as soon as possible so that the County can realize savings with either option for the July 2014 renewal


On March 23, 2010, President Obama signed the health care reform bill, Patient Protection & Affordable Care Act (ACA), into law

The Key Elements of this bill are:1. Cover more people2. Shift control from local state government to federal government3. Raise money to cover more people

Consequently, the County has already implemented some of the provisions of the ACA: Cover Dependents to the age of 26 $0 Preventive Care W-2 reporting – Report the aggregate cost of insurance premiums for employee on the 2012 W2 The cost of Over the Counter drugs no longer reimbursable through the Medical FSA The limit on Health FSA salary reductions - $2,500 / year Distribution of uniform Summary of Benefits Coverage (SBC)

Section 2: Health Care Reform Update


There are three fees associated with the ACA Fees that will be included with the County’s July 1, 2014 Renewal, expected to be between 2% and 3%:

Federal Health Insurance Industry Fee – The ACA imposes a fee on all insurance carriers to help fund the Exchange and is based on market share of premium

Patient Centered Outcomes Research Institute (PCORI) – This fee will fund a private, non-profit corporation whose purpose is to assist providers, payers and policy makers in making informed health decisions

Reinsurance Fee – Insurers are required to contribute to a temporary reinsurance program for the individual market in order to offset the risk of high cost claims (risk shifting)

Employer Shared Responsibility (a.k.a. Pay of Play) – January 1, 2015 – Employers must get ready now! Employer must offer Affordable health coverage

The plan is affordable if the employee does not pay more than 9.5% of W2 earnings for the single only premium of the lowest cost plan offered by the employer

Health plan must be offered to all employees working an average of 30+ hours a week, 130 hours a month

Coverage must meet Minimum Value standards

Section 2: Health Care Reform Update - On the Horizon


Health Insurance Exchange/Covered California - January 1, 2014 In general, the Exchange will serve as a government-administered marketplace providing a choice of

group and individual health plans through a website that will provide detailed information about plans and offer a toll-free number to assist consumers in understanding their options, compare and buy coverage, as well as connect eligible individuals to federal subsidies

The Exchange will serve as a consortium of individuals and small businesses that will pool their buying power, in theory, to get coverage at lower prices

The Exchange will offer plans in 5 categories, ranging from catastrophic to extensive Employers will need to distribute a notice to all employees regarding the Exchange in October 2013

Individual Mandates – US Residents must purchase health insurance, or pay an annual increasing schedule of tax penalties – January 1, 2014 2014: $95 per person (capped at $285 per family) or 1 percent of household income 2015: $325 (capped at $975) or 2 percent of household income 2016: $695 (capped at $2,085) or 2.5 percent of household income 2017 and beyond: The $695 penalty is indexed for a cost-of-living adjustment and must be rounded to the

next lowest multiple of $50. For families, the flat-dollar penalty is capped at three times the indexed value for an individual. For example, if in 2017 the penalty is $700, the capped amount would be $2,100. As in 2016, the individual mandate penalty is the greater of the flat-dollar amount or 2.5 percent of household income

Section 2: Health Care Reform Update - On the Horizon


Section 2: Health Care Reform Cadillac Tax

Who Insurers and TPAs

What 40% tax on Excess Premiums

Tax = [(Individual premium – premium cap) x 40%] x # singles enrolled

+[(Family premium – premium cap) x 40%] x # families enrolled

Penalty

When 2018

How Healthcare premiums >$10,200/individual and $27,500/ family are

“excessive” Higher limits for high risk jobs or workforces with older populations Will be adjusted for inflation (benchmark at FEHB)


Section 2: Health Care Reform Cadillac Tax Illustration - Estimated

Health Planswill be subject to

tax in 2018;immediate

attention needed

County of Santa Clara Single FamilyMonthly Rates for Fiscal Year 2013-2014

Kaiser HMO $10 $674.02 $1,954.67Valley Health HMO $0 $634.21 $1,948.14Health Net POS $15 $988.98 $2,093.91Annual 2014Kaiser HMO $10 $8,088.24 $23,456.04Valley Health HMO $0 $7,610.52 $23,377.68Health Net POS $15 $11,867.76 $25,126.92Annual 2018 @ 9%/year (4 years)Kaiser HMO $10 $11,417.21 $33,110.11Valley Health HMO $0 $10,742.87 $32,999.50Health Net POS $15 $16,752.31 $35,468.70Current Cadillac Tax Threshold (2018) $10,200.00 $27,500.00

Annual Taxable Amount (PEPY)Kaiser HMO $10 $1,217.21 $5,610.11Valley Health HMO $0 $542.87 $5,499.50Health Net POS $15 $6,552.31 $7,968.70Annual Tax at 40% (PEPY)Kaiser HMO $10 $486.88 $2,244.05Valley Health HMO $0 $217.15 $2,199.80Health Net POS $15 $2,620.92 $3,187.48


Section 3: Account Based Health PlansOverview

Effective January 1, 2015, the County must offer affordable health coverage to all employees working over 30 hours a week In order to meet this requirement, the County will need to implement a lower cost plan The County will accomplish this requirement with the introduction of a High Deductible Health Plan

(HDHP), which can be offered to all employees as an Account Based Health Plan

An Account Based Health Plan is a plan that combines a qualified High Deductible Health Plan (HDHP) with a Health Savings Account (HSA)

Together, the High Deductible Health Plan and the Health Savings Account can help achieve lower healthcare costs, which ultimately translates into lower premiums for employees and employers

You will also learn how the Health Savings Account may provide certain individuals with the opportunity to:

Save pre-tax dollars Roll over from year to year Earn interest Be invested in the market And, used as a retirement vehicle after the individual turns 65 and becomes enrolled in Medicare


Section 3: Account Based Health PlansWhat is a High Deductible Health Plan?

The IRS defines certain terms that must be met to be considered a “Qualified High Deductible Health Plan

The terms of a “Qualified” High Deductible Health Plan (HDHP) are as follows:

Insurance that does not cover first dollar medical expenses (including prescription), except for Preventive Care, until the deductible is reached

A plan with minimum Aggregate Deductible for 2014 of:

$1,250 (self-only coverage)* $2,500 (family coverage)*

Important: Full Family Deductible must be met before plan coinsurance and/or copays kick in

A plan with a maximum annual out-of-pocket (including deductibles and co-pays) for 2014 of:

$6,350 (individual)* $12,700 (family coverage)*

Can be an HMO, PPO, or indemnity plan, as long as it meets IRS requirements

*These amounts are indexed annually by the IRS


Section 3: Account Based Health PlansWhat is a Health Savings Account?

A Health Savings Account (HSA) is a special “tax-advantaged” account owned by an individual that can be used in conjunction with an qualified HDHP

In fact, you must have a qualified High Deductible Health Plan in order to open and contribute to a Health Savings Account

If you are no longer covered by an HDHP in the future, you can still use the funds in the account, you just can no longer contribute

Individuals and/or Employer can put money into the Health Savings Account “pre-tax” (federal level only) to help pay for “Qualified Medical Expenses “

CA does not consider employee or employer contributions to be tax-free

The IRS sets annual limits for the amount of money that can be put into the Health Savings Account: $3,300 (self-only coverage) for 2014* $6,550 (family coverage) for 2014*

There is “no use it or lose it” rules like Flexible Spending Arrangements (FSAs)

Unused funds in the account continue to roll over year after year and can earn interest and be invested

Upon turning age 65, the individual can use any unused funds in the account for any purpose, penalty free, but subject to ordinary income tax

(*These amounts are indexed annually)


Section 3: Account Based Health PlansSimple Illustration

An HSA is a tax-advantaged account that works with an HSA-compatible

High Deductible Health Plan


Section 3: Account Based Health PlansAdvantages


Lower insurance premiums

Lower trend factors than traditional plans, which translates to lower renewal increases

$0 Preventive Care

Health Savings Account

HSA’s encourage individuals to be more engaged and take on a more empowered approach to their own healthcare

This engagement can lead to smarter utilization and lower healthcare costs

Tax Savings (Federal Level Only)

Account is portable – tied to employee, not the employer

Funds can grow from year to year and earn interest income

Funds can be invested

Potential retirement vehicle, as funds can be used for anything with no penalties


Section 3: Account Based Health PlansDisadvantages


The Aggregate Deductible must be met before any services are paid (except preventive care) On a family plan, the full family deductible must be met before plan coinsurance and/or copays kick in

Individuals on this plan are sometimes not used to paying out of pocket costs at the doctors office or the pharmacy

Individuals may experience large out-of-pocket costs if the balance in the Health Savings Account is not enough to cover the expenses

Health Savings Account

Can be complicated to understand, lots of education and communication is required

The individual is responsible for making sure expenses are “qualified”, or penalties can apply

The individual cannot be enrolled in both an FSA and an HSA at the same time, unless the FSA is a Limited Purpose FSA


Section 3: Account Based Health PlansWhy Offer?

HDHP w/Health

Savings Account

Price Transparency

H.S.A

Low Cost

*Note: California does not consider employee or employer contributions to an HSA tax free

Lower premium due to Deductible Preventive Care covered at 100%

Allows Employer/Employee contributions Tax Free contributions (except CA state) Unused $$$ Roll-over Can invest money Employee owned; portable

Smarter Utilization Can lead to lower healthcare costs


Section 3: Account Based Health PlansContribution Rules

There are several ways you can contribute to your account: Pre-tax through employee payroll deductions - Reduces your federal adjusted gross income (the amount you pay

tax on)

Employer Contribution – Pre-tax

Post-tax by personal check - When you file your taxes, you can make an adjustment to your gross income to

receive the tax benefit

Anyone may contribute to your HSA, provided the total contributions to your HSA do not exceed your

maximum allowable annual limit

If you are not covered by a qualified HDHP, you may not contribute to an HSA, but you can spend it

down, or leave it to earn interest

If you change jobs to another company and enroll in an HDHP, you may roll over from one HSA account

to another

You can make catch-up contributions if you are 55 years of age or older ($1,000)

Contributions must stop once you become entitled to Medicare, but the funds in the HSA can still be

used


Section 3: Account Based Health PlansDistribution Rules

“Qualified Medical Expense” examples (tax free/no penalty): Deductibles, Coinsurance, Co-pays Doctor’s fees, including hospital & lab Prescription Drugs Dental, Vision & Hearing services Chiropractic & Acupuncture Durable Medical Equipment Certain OTC medicines, if prescribed by a doctor Psychiatric care Weight loss & smoking cessation programs COBRA Premiums Medicare Premiums – Special Rules apply LTC Premiums

It is the Account Holders responsibility to ensure that the funds used from the HSA are for Qualified Medical Expenses, or penalties will apply

Penalties for not using distribution for “Qualified Medical Expenses”: Amount of distribution is included in income 20% additional tax applies (except when taken after):

Individual dies or becomes disabled Individual is age 65

Upon the death of an individual, HSA transfers to Spouse tax-free (any other transfer taxed)


HSA $1,000 employee

contribution

Preventive Care100% In-Network

After Deductible10% Coinsurance to the Annual OOP of $3,000

$1,500 DeductibleThis is your annual $1,500

deductible, but can be reduced by HSA dollars you use for covered

services

Susan Smith’s HSA Plan

$1,500 Deductible

$1,000 employee contribution $1,000

Expenses:Ob/Gyn office visit & lab tests - $350

Prescription drugs - $150$500

Paid by Preventive Care benefit at 100% $350

Paid from HSA (Susan’s choice) $150

HSA Balance $850

Year 1

Meet Susan Smith | Single Coverage

Section 3: Account Based Health Plan OverviewPlan Illustration Example


Susan Smith’s HSA Plan

$1,500 Deductible

HSA Balance:$850

$1,000 employee contribution$1,850

Expenses:

Ob/Gyn visit & lab tests - $150

Physician visits - $100

Prescription drugs - $200

$450


Paid from HSA (Susan’s choice) $300

HSA Balance $1,550

Year 2

HSA $1,000 employee

contribution


After Deductible10% Coinsurance to the Annual OOP of $3,000

$1,500 Deductible(This is your annual $1,500


services)

Meet Susan Smith | Single Coverage



The Jones’ HSA Plan

$3,000 Deductible

$2,000 employee contribution $2,000

Expenses:

Preventive visits & lab tests - $500

Physical therapy - $800


$1,500


Paid from HSA (the Jones’ choice) $1,000

HSA Balance $1,000

Year 1

HSA $2,000 employee

contribution


After Deductible 90% Coinsurance up to

Annual OOP Max of $6,000

$3,000 Deductible(This is your annual $3000


services)

Meet the Jones’ | Family Coverage



The Jones’ HSA Plan

$3,000 DeductibleHSA Balance: $1,000

$2,000 employee contribution$3,000

Expenses:

Preventive visits & lab tests - $500

Hospital and surgery fees - $10,000

Office visits - $500


$11,200


Remaining balance due $10,700

Paid from HSA (the Jones’ choice) toward $3,000 deductible $3,000

10% Coinsurance paid by Jones’ after Health plan pays 90%

$7,700 (90% x $7,700 = $6,930)

$770(10%

Coinsurance)

Total amount Plan pays $7,430

Total amount Jones’ pay $3,770

HSA Balance $0

Year 2

HSA $2,000 employee

contribution


$3,000 Deductible(This is your annual $3,000


services)

Meet the Jones’ | Family Coverage


After Deductible 90% Coinsurance up to

Annual OOP Max of $6,000


Section 5: Question & Answer

Benefits Roundtable August 20, 2013 Rey Guillen, Employee Benefits Director Sandra Poole, Labor...

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Transcript of Benefits Roundtable August 20, 2013 Rey Guillen, Employee Benefits Director Sandra Poole, Labor...